What Is Estate Planning & How Can Social Security Help With Estate Planning?

What Is Estate Planning?

‍

Social Security is a federal program that provides financial support to retirees, disabled individuals, and their families. It was created to ensure that people have a stable income after they stop working, helping them maintain a decent standard of living. There are three main types of Social Security benefits:

‍

Estate planning involves determining how an individual's assets will be preserved, managed, and distributed after death. It also takes into account the management of an individual's properties and financial obligations if they become incapacitated.

‍

1. Retirement Benefits: These are paid to people who have reached retirement age and have paid into the Social Security system through payroll taxes during their working years.

2. Disability Benefits: If you become disabled and cannot work, Social Security provides monthly payments to help cover living expenses.

3. Survivor Benefits: If a worker paid into Social Security passes away, their spouse, children, or other eligible dependents can receive survivor benefits.

‍

Some Things You Can Include In An Estate Plan Are:

‍

• A will
• Trusts
• Charitable donations
• Naming an executor and beneficiaries
• Funeral arrangements
• Guardians of minor children and pets

You can work with an attorney experienced in estate law to set up an estate plan. There's no specific age at which you should start, but many advisers suggest starting as soon as you reach adulthood. You should revisit your plan every few years to make sure it's up to date. If you die without an estate plan, your state's intestacy laws will determine where your assets go. This process can be lengthy and stressful for your family. 

‍

How Can Social Security Help With Estate Planning?

‍

Social Security plays a significant role in estate planning by providing income in retirement, supporting dependents through survivor benefits, and offering financial protection in case of disability. While Social Security benefits can't be directly inherited like other assets, they still influence how you plan for your family's future. By understanding how Social Security fits into your overall estate plan, you can ensure you and your loved ones are financially secure now and in the future.

‍

In 2024, the average Social Security benefit is approximately £1,907 per month, with an annual adjustment to maintain purchasing power amidst inflation. Survivor benefits are available for spouses, who can receive up to 100% of the deceased spouse's benefit, and for children, who may also qualify for support under certain conditions.

‍

To maximise your benefits, consider delaying retirement beyond your Full Retirement Age (FRA), as this increases monthly payments. Strategic planning, often with the guidance of a financial advisor, can help tailor your Social Security strategy for optimal results.

Regarding taxes, be mindful of income thresholds that affect Social Security taxation. Additional income from sources like pensions or investments may influence how much of your Social Security is subject to tax.

‍

For estate planning, Social Security can impact Medicaid eligibility and considerations for long-term care. Factoring in potential long-term care costs can ensure that Social Security benefits align with your overall estate and healthcare plans.

‍

Survivor benefits provide essential financial support for surviving spouses and children. A surviving spouse can receive up to 100% of the deceased spouse’s Social Security benefit, which also includes any cost-of-living adjustments (COLAs) made to the benefit. In addition, surviving children may be eligible for benefits, depending on factors such as their age and other specific criteria. Maximising your Social Security benefits can be achieved by delaying retirement.

‍

Delaying the claim of benefits beyond your Full Retirement Age (FRA) can significantly increase your monthly payments, with an approximate 8% increase for each year you wait until age 70. Strategic claiming is also key; working with a financial advisor can help you and your spouse determine the best strategy based on factors like income needs and health.

‍

It’s important to stay informed about Cost-of-Living Adjustments (COLAs) since Social Security benefits are adjusted annually to account for inflation. The 2023 COLA was a substantial 8.7%, and future adjustments are expected to follow the Consumer Price Index (CPI), although specific figures for 2024 and beyond have not yet been determined. 

‍

‍

1. Tax Implications of Social Security Benefits:

• Social Security benefits may be taxable depending on your total income from other sources.
• It’s crucial to review how your total income could affect your tax obligations and eligibility for Medicaid.

‍

2. Income Tax Thresholds:

• Single filers with a combined income of $25,000 or less: No tax on Social Security benefits.
• Married couples filing jointly with a combined income of $32,000 or less: No tax on Social Security benefits.
• Single filers with income between $25,000 and $34,000: Up to 50% of benefits may be taxable.
• Married couples filing jointly with income between $32,000 and $44,000: Up to 50% of benefits may be taxable.
• Single filers with income above $34,000: Up to 85% of benefits may be taxable.
• Married couples filing jointly with income above $44,000: Up to 85% of benefits may be taxable.

‍

3. Other Income Considerations:

• Review how other income-generating investments, like pensions and savings, affect the taxation of Social Security benefits.

‍

4. Estate Planning Considerations:

• The interplay of IRA-required minimum distributions (RMDs) and future changes in Medi-Cal rules related to asset limits and income will affect estate planning for Social Security tax obligations.

‍

5. Spousal and Divorced Spousal Benefits:

• Important spousal benefit rules can significantly increase lifetime household benefits.
• Special rules apply to divorced individuals and surviving spouses.

‍

What Social Security Can Cover?

‍

• Social Security is a federal program in the United States that provides financial assistance to eligible individuals and their families. It offers several types of benefits:

‍

1. Retirement Benefits

• Retirement: Once you reach a specific age (currently 66 for full benefits), you can begin receiving monthly payments.
• Spousal Benefits: If you're married to someone who is receiving Social Security benefits, you may be eligible for spousal benefits, even if you haven't worked enough to qualify for your own.
• Survivor Benefits: If you're a surviving spouse or child of a deceased worker, you may be eligible for survivor benefits.

‍

2. Disability Benefits

• Disability Insurance: If you become disabled and can no longer work, you may qualify for Social Security Disability Insurance (SSDI) benefits.

• Supplemental Security Income (SSI)
• SSI: This program provides financial assistance to people with disabilities and low income.

‍

Also read - va pay raise 2025

‍

Key Benefits of Estate Planning:

^‍

1. Protection for Your Loved Ones:

• Clear Distribution of Assets: You can specify who receives your assets, ensuring that your estate is distributed according to your wishes, reducing ambiguity and potential family conflicts.
• Guardianship for Children: If you have minor children, you can designate a guardian to care for them, preventing disputes over their future care.
• Minimising Family Disputes: A well-organised estate plan reduces the chances of disagreements among family members, ensuring a smoother transition of wealth and assets.

‍

2. Financial and Legal Efficiency:

• Tax Efficiency: Implementing strategies to reduce estate taxes and other fees can ensure that your loved ones receive more of your estate and not less due to high tax liabilities.
• Avoiding Probate: Probate can be a time-consuming and expensive process. A solid estate plan can help bypass probate, saving both time and money for your heirs.

‍

3. Providing Peace of Mind:

• Knowing Your Wishes Are Fulfilled: Having a clear estate plan provides the peace of mind that your assets will be handled according to your wishes.
• Reducing Stress for Loved Ones: An estate plan can alleviate the emotional and financial burdens on your family members during an already difficult time.

‍

4. Handling Incapacity:

• Power of Attorney: This allows you to designate someone to make financial decisions on your behalf if you become incapacitated.
• Healthcare Proxy: Appointing someone to make healthcare decisions ensures that your medical care is in the hands of a trusted individual if you're unable to make decisions for yourself.

‍

‍

The Long-Term Impact:

‍

Estate planning is not just about protecting your assets—it’s about ensuring that your legacy is passed down most efficiently and thoughtfully. By specifying the allocation of your assets, you can avoid potential conflicts and ensure your family is supported. This planning also allows you to make provisions for specific needs, such as funding a child’s education or providing financial stability for a spouse.

‍

In short, a well-crafted estate plan offers both immediate and long-term benefits, ensuring your legacy endures and your loved ones are cared for. It’s not just about transferring wealth—it’s about preserving peace of mind and security for your family during life’s most challenging times.

‍

How Much Does Estate Planning Cost?

‍

Several people ask how much does estate planning cost. The cost of estate planning typically ranges from £150 to £350 per hour, with an average plan requiring between 20 and 25 hours to complete. This means you can expect a total cost of £3,000 to £8,750.

Prices vary due to the complexity of estate planning, as each person’s assets and wishes are unique. A basic plan may only cover asset distribution, while a more comprehensive plan addresses wealth management and future needs, especially for families with children.

• Average hourly cost: £200
• Minimum hourly cost: £150
• Maximum hourly cost: £350

‍

The total cost can also depend on your location and the experience level of the solicitor. Professionals in the southeast of the UK generally charge higher rates than those in other regions, so it may be beneficial to compare options to find the best fit for your needs and budget.

‍

In summary, estate planning is a crucial process for securing financial stability, protecting assets, and providing for loved ones after death or during incapacitation. Social Security benefits also play a significant role, offering retirement, disability, and survivor support that complements a well-thought-out estate plan. By planning strategically—considering factors like taxation, asset allocation, and Social Security options—you can minimize potential family conflicts, reduce taxes, and ensure efficient asset distribution.

‍